Executive Summary / Key Takeaways

• Demographic Tailwinds & Operational Moat: American Healthcare REIT (AHR) is uniquely positioned to capitalize on the accelerating demand from an aging population, leveraging its integrated management platform and high-quality operator partnerships, particularly Trilogy Health Services, to drive superior operational performance.
• Robust Financial & Organic Growth: AHR delivered exceptional Q2 2025 results, with Normalized FFO per share up 27% year-over-year and total portfolio same-store NOI growing 13.9%, fueled by strong occupancy gains, RevPOR acceleration, and disciplined expense management across its RIDEA segments.
• Strategic Capital Allocation & Deleveraging: The company has significantly strengthened its balance sheet, reducing net debt to EBITDA from 8.5x at YE 2023 to 3.7x by Q2 2025 through strategic equity raises and accretive dispositions, providing substantial capacity for future growth.

• Differentiated Technology & Competitive Edge: AHR's operational technology, exemplified by Trilogy's centralized revenue management program and industry-leading care outcomes (CMS 4+ stars), provides a tangible competitive advantage, enabling higher rates, better mix, and faster stabilization of new developments.
• Optimistic Outlook with Embedded Upside: Management has raised its full-year 2025 NFFO per share guidance to $1.64-$1.68 and total portfolio same-store NOI growth to 11%-14%, with significant embedded upside from an active acquisition pipeline not yet factored into projections.

The Foundation: A Specialized REIT for a Growing Need

American Healthcare REIT, Inc. (AHR) operates as a self-managed real estate investment trust, strategically focused on acquiring, owning, and operating a diversified portfolio of clinical healthcare properties. This portfolio primarily encompasses senior housing, skilled nursing facilities (SNFs), and outpatient medical (OM) buildings across the United States, the United Kingdom, and the Isle of Man. AHR's core strategy centers on generating current income, with a selective approach to property development, particularly within its Integrated Senior Health Campuses (ISHC) and Senior Housing Operating Properties (SHOP) segments, which predominantly utilize a RIDEA structure.

The company's journey took a transformative turn in 2024 with its initial public offering (IPO) in February, followed by a successful follow-on offering in September and the establishment of an At-The-Market (ATM) equity program. These initiatives collectively raised nearly $1.4 billion in equity during 2024, fundamentally reshaping AHR's financial landscape. A pivotal strategic move was the September 2024 acquisition of the remaining 24% minority interest in Trilogy REIT Holdings LLC for $258 million, solidifying AHR's sole ownership of Trilogy. This move was designed to optimize capital allocation and accelerate the development of purpose-built facilities, directly aligning with the company's overarching mission of providing high-quality care and health outcomes.

Unprecedented Demand Meets Strategic Supply

AHR operates within an industry experiencing a profound demographic shift. The population aged 80 and above is projected to grow by over 700,000 individuals annually through 2030, creating an accelerating demand wave for long-term care services. This surge in demand is juxtaposed against a backdrop of severely constrained supply, with the senior housing industry adding less than 20,000 units per year since 2020. Construction starts continue to decelerate, despite the urgent need for new facilities, exacerbating the supply-demand imbalance. This structural mismatch creates a multi-year secular tailwind for operating fundamentals, characterized by rising occupancies, RevPOR (revenue per occupied room), margins, and net operating income.

AHR's strategic response to this environment is multifaceted. The company is actively managing its portfolio through accretive acquisitions and disciplined dispositions. In 2024, AHR invested over $650 million in external growth within its managed long-term care segments, including significant acquisitions in Oregon and Washington. Concurrently, it divested approximately $140 million of lower-quality, triple-net leased SNFs and various OM buildings in Q4 2024 and Q2 2025, strategically enhancing the overall quality and growth profile of its portfolio. This capital recycling is not merely about funding growth but about sharpening the portfolio's focus on high-growth, high-quality assets.

The Operational Moat: Technology and Best-in-Class Management

AHR's competitive differentiation is rooted in its "fully-integrated management platform" and "hands-on asset management approach," which act as its core operational technology. This is not a traditional hardware or software product, but a sophisticated system of processes, data utilization, and human expertise that drives superior outcomes. At the heart of this lies Trilogy Health Services, AHR's ISHC operator, which exemplifies this operational excellence.

Trilogy's "centralized revenue management program" is a key technological differentiator. This program, developed with insights from aviation and hospitality consultants, provides a real-time "dashboard and toolkit" to Executive Directors at each of its 130 campuses. This enables highly granular, unit-specific pricing decisions that factor in variables like room view, location, current market rates, occupancy levels, tour volumes, and lead generation. This sophisticated approach allows Trilogy to optimize revenue mix and pricing power, rather than simply chasing occupancy. For instance, Trilogy's Medicare Advantage rate is 79% higher than Medicaid and 42% higher than private pay, a direct result of its ability to be selective and negotiate favorable contracts due to its reputation for high-quality care.

The tangible benefits of this operational technology are quantifiable. Trilogy boasts a portfolio-wide CMS rating of over 4 stars, significantly outperforming the national average of below 3 stars. This superior quality of care translates into Trilogy being a "highly sought-after post-acute care provider," strengthening its bargaining position with Medicare Advantage plans. Furthermore, Trilogy's "industry-leading employee retention," back to pre-COVID levels, is a testament to its investment in the "employee experience" and training programs, such as its CNA training. This reduces reliance on costly agency nursing and minimizes overtime expenses, directly impacting profitability.

AHR is actively leveraging Trilogy's "best-in-class practices" to "refine our operating platform capabilities" across its SHOP portfolio. This involves improving "regional benchmarking tools and resources" to instill better pricing discipline, wage monitoring, and expense management. The company's 2025 Manager Equity Plan further aligns the incentives of its external RIDEA managers with overall business success. This strategic transfer of operational know-how from Trilogy to the broader portfolio is a critical component of AHR's long-term growth strategy, aiming to replicate Trilogy's success in driving both revenue growth and cost savings.

Financial Strength and Performance Trajectory

AHR's operational prowess is translating into robust financial performance. For the second quarter of 2025, the company reported Normalized FFO of $0.42 per fully diluted share, marking a significant 27% year-over-year increase. This was underpinned by a sector-leading 13.9% total portfolio same-store NOI growth compared to Q2 2024.

The ISHC segment, driven by Trilogy, was a standout performer, achieving 18.3% year-over-year same-store NOI growth in Q2 2025. This was supported by an impressive 219 basis point increase in occupancy to 88.9% and a 7.8% rise in average daily rates across all payers. The SHOP segment also demonstrated strong momentum, with same-store NOI up 23% year-over-year. Despite average occupancy appearing flat from Q1 to Q2, spot same-store occupancy rebounded to north of 87.5% by quarter-end, fueled by the highest move-in activity in years. The SHOP segment's RevPOR accelerated by 6.6% year-over-year, and its same-store NOI margin expanded to above 20%.

The company's strategic capital allocation has dramatically improved its financial health. Net debt to EBITDA, a critical leverage metric, has fallen from 8.5x at the end of 2023 to a healthy 3.7x by the end of Q2 2025. This deleveraging was achieved through nearly $1.4 billion in equity raised in 2024, including $204.3 million from direct ATM sales at an average price of $34.72 per share and the settlement of a $127.8 million forward ATM agreement at $35.96 per share in early July 2025. This strong balance sheet provides AHR with significant flexibility to pursue its robust acquisition pipeline, which currently stands at "well over $300 million" in awarded deals, predominantly in the SHOP segment, with assets often acquired "well below replacement cost" in the mid-to-high $200,000 per unit range. Stabilized yields for these acquisitions are expected in the high-7s to 8s.

Outlook and Embedded Upside

AHR's management has expressed strong confidence in its future trajectory, raising its full-year 2025 Normalized FFO per share guidance to a range of $1.64 to $1.68, up from the previous $1.58 to $1.64. Concurrently, total portfolio same-store NOI growth guidance has been increased to 11% to 14%, reflecting the "strong organic growth" in its portfolio. Segment-specific guidance for 2025 includes ISHC same-store NOI growth of 15% to 19% and SHOP same-store NOI growth of 20% to 24%. Even the Outpatient Medical segment, which has faced headwinds from health system downsizing, is expected to see positive same-store NOI growth of 1% to 1.5%, signaling a more optimistic outlook for the next 12 months.

Crucially, this revised guidance "does not assume any additional acquisitions or capital markets activity beyond what we disclosed... nor does it include any deals from our awarded pipeline." This suggests significant "embedded upside" that could further enhance future performance. Management anticipates RevPOR growth will continue to outpace expense growth in its managed segments for at least the next 12 to 18 months, driving further NOI and margin expansion. Longer term, AHR expects portfolio occupancy to reach the "mid-90s," a substantial improvement from current levels, fueled by the persistent demand-supply imbalance. The company also plans to break ground on approximately $140 million in new Trilogy development projects in 2025, including independent living villas and campus expansions, with new campuses expected to stabilize in a compressed timeframe of 12-18 months, down from the historical 2.5-3 years.

Risks and Mitigation

Despite the compelling growth story, AHR faces pertinent risks. The "One Big Beautiful Bill Act" (OBBBA), signed in July 2025, includes an estimated $1 trillion in Medicaid spending cuts, which could impact financial performance. However, AHR's Trilogy segment has strategically reduced its Medicaid exposure to approximately 21% of its portfolio and possesses the operational flexibility to "pivot and convert those rooms to AL, memory care, more Medicare beds" if reimbursements become unfavorable. Management also believes that significant cuts to long-term care Medicaid reimbursements are unlikely to be sustained due to the critical role these services play.

Inflationary pressures on labor, services, energy, and supplies remain a concern, but AHR mitigates this through proactive revenue management, including higher annual rent and care fee increases and frequent market rate adjustments. Interest expense is also a headwind, with higher variable rates and delays in asset sales impacting debt paydowns. However, the company's significant deleveraging and ample capacity on its $1.15 billion credit facility provide a strong buffer. The evolving legal landscape around AI tools, and their potential for inaccuracy or cybersecurity risks, is also a new consideration, which AHR must monitor to avoid competitive disadvantage. The labor environment continues to be a pressure point, but Trilogy's industry-leading employee retention and training programs offer a strong mitigation strategy.

Conclusion

American Healthcare REIT presents a compelling investment thesis, deeply rooted in its strategic alignment with powerful demographic tailwinds and its differentiated operational model. The company's history of disciplined capital allocation, culminating in significant deleveraging and the full ownership of Trilogy, has positioned it for accelerated growth. AHR's operational technology, particularly Trilogy's sophisticated revenue management and high-quality care delivery, provides a robust competitive moat, enabling superior pricing power, efficient operations, and faster stabilization of new developments.

With strong Q2 2025 financial results, an upwardly revised 2025 guidance, and a substantial pipeline of accretive investments, AHR is poised for continued sector-leading performance. While risks such as potential Medicaid cuts and inflationary pressures exist, management's proactive mitigation strategies and the inherent flexibility of its RIDEA-structured portfolio provide resilience. For investors seeking exposure to the high-growth healthcare real estate sector, AHR offers a unique blend of operational excellence, strategic clarity, and significant embedded upside, making it a standout opportunity in a demanding market.